Special Report: Is America the sick man of the globe?

Not long ago, if you wanted steak for lunch at the Texan Restaurant, less than two minutes drive from the Nexteer Automotive assembly plant, you had to be in the door by 11 o'clock in the morning. If you arrived any later, you joined a long line with other laggards and waited for a table to open up.

With noon fast approaching on a recent day, however, only a handful of customers sat in one of the restaurant's two sections and the other was closed.

Asked how the decline in the U.S. auto industry has affected the local economy, Tammy Maynard, a waitress here since 1988, waved a hand around at the empty tables and said: "You're looking at it, sugar."
Regulars and retirees keep the restaurant in business, while workers at the nearby auto supplier plant buy steak at the beginning of the month when they get paid -- if they come at all -- and then dine on specials over the next four weeks.

"I just keep praying every day that we've hit the bottom and that things are going to get better," Maynard said, "because it doesn't seem like it could get any worse."

The U.S. government may have bailed out General Motors, the country's largest automaker, but it hasn't begun to tackle the broader problems that led to the city's implosion. Doing so, experts say, would require the kind of political will that has not been in great evidence in the country recently.

To the few remaining auto workers left in a city half the size it was in 1960, the America they knew growing up is long gone and things can only get worse.

"We have made concession after concession on wages and benefits and there is no end in sight," said Dean Parm, a worker and union committeeman at Nexteer Automotive, whose hourly wages have been cut to around $17 an hour from $28. "It feels like we're dinosaurs. And we're on the verge of extinction."
This is the point of the story where many Americans typically glaze over because they see Michigan as a long-standing financial basket case of a state thanks to the shrinking U.S. auto industry. But the problem is that the broad decline of the manufacturing sector that has been underway in this country for decades now may threaten not just the long-term health of the economy but also the living standards of all but the wealthiest Americans.

"The whole country is now seeing the story that Michigan has been living with for a long time," said Diane Swonk, chief economist at Mesirow Financial. "We have kicked the can so far down the road that now all we have is a cliff to fall off."

"The recession merely revealed a reality that has been with us for a long time. We faced a growing gap in education and skills that we tried to fill with debt and credit, which gave us the illusion of growth."
After World War Two, unskilled blue-collar jobs in manufacturing -- typified and in many ways defined by the auto sector -- became America's easy path to the middle class. As U.S. manufacturing declined, starting in the 1980s Congress and successive administrations focused instead on the financial sector and relied on debt -- its own and that of the U.S. consumer -- to foster economic growth.

At the same time, U.S. companies faced a growing competitive challenge, largely from Asia -- both in terms of manufacturing prowess and lower wages and legacy costs -- that hastened the nation's exodus from the sector.

That in turn created lop-sided trade imbalances, with the U.S. invariably in the red. The U.S. trade deficit with China, for instance -- a nation that tightly controls its imports -- hit a record of $268 billion in 2008 and could reach $270 billion this year.

At the other end of the spectrum, deregulation and a laissez-faire attitude toward financial institutions culminated in the housing "boom" that former Ohio Attorney General Richard Cordray (who failed to win reelection in November) has aptly described as a "Roman orgy" of debt.

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Chinese rush to gold as inflation fears bite

While recent statistics show that China's gold imports have risen dramatically this year, despite China itself being the world's largest gold producer with mine production still rising to, anecdotal evidence suggests that this may just be the tip of the iceberg as Chinese people are, apparently, rushing to buy gold as an inflation hedge.

A report in the Financial Times suggests that gold purchasing by individuals is turning into such a rush - and the rising price, if anything, is - contrary to Indian experience - fuelling the intensity of gold demand there.  With the ever-rising growth in the numbers of middle-income Chinese as the country's wealth drips down to the people, this source of gold demand is becoming increasingly relevant to the global market.  China is expected to surpass India as the world's leading gold purchaser within the next few years and with the kind of surge in popularity of gold bars and coins, rather than jewellery, there this could even take place sooner rather than later.

As an indicator of the kind of demand being seen in China, FT Reporter Leslie Hook notes in a despatch from the Chinese capital: "At Beijing's largest gold shop, the queues to buy bullion mini bars have turned into scrums as customers jostle for one of the country's hottest commodities. The phone behind the bullion counter rings off the hook as a frantic sales clerk tries to answer buyers' questions. The electronic chart displayed behind him says it all: the price of gold is rising and Chinese investors, worried about inflation, want in on the trend."

For the global gold market this is very significant as momentum in the Western gold market appears to have slowed dramatically.  As Mineweb writer Rhona O'Connell noted yesterday (see: Gold ETF momentum slows above $1,300 - can silver investment be sustained?) since gold hit around $1300 an ounce ETF inflows and outflows have been broadly in parallel, and it has probably been ETF demand which has been the principal demand driver for gold over the past few years.  Gold and silver bullion sales also seem to be slowing in the west as confidence in economic recovery, however unjustified, is beginning to return and people are looking elsewhere to invest.

What is interesting about the Chinese experience is that the apparently huge demand from the public - initially stimulated by state institutions (see: China pushes silver and gold investment to the masses ) - is due to fear of inflation.  Maybe the Chinese are more sophisticated in economic theory than their Western counterparts, but the levels of new money being pushed into the Western (and Japanese) economies by government has to have severe inflationary consequences down the road.  It's just the Western general population hasn't yet understood this consequential result.  Give them time!  In China inflation is already beginning to impact as the western stimuli are beginning to raise inflation in China rather than in their home countries - so far.

Most western observers also believe that the Chinese state is absorbing all of that country's gold production and taking it into reserves - even if this is not actually being reported in official statistics, but being held in an account other than that of the Central Bank until China chooses to make the information public.  What this means is that a whole hunk of global production is not appearing on the open market, which effectively tightens supplies.  Taken together with the surge in Chinese demand this will have a serious impact on what becomes available on the open market - and with some Central banks having become buyers - and a dearth of sellers from this source - gold's fundamentals would seem to be altering in favour of continuing price rises for the metal.

China's burgeoning demand is now likely to continue to build - at least until the Chinese New Year (which begins on February 3^rd next year) - and will help to maintain the gold price at or around the current level or better.  Indeed with Western activity already beginning to wind down ahead of the Christmas and Western New Year holidays making trading thin in New York and London, there could be a positive impact on price developing by the calendar year end.

Lindsey Williams: Crude Oil Price Targeted for $150-200 per Barrel

During his hour-long radio interview on the Alex Jones show today, broadcast over GCNLive.com, longtime Alaska oil reserves expert Lindsey Williams told Alex that he’d learned recently from two of this longtime friends, both retired top executives of major oil producers, that the price of crude oil, now rising again, is slated to move to $150-200 per barrel soon.  According to Williams, the equivalent price of gasoline at the pump should range then between $4-5 per gallon.  In fact, the price for drivers in California is about four dollars already, he said.

According to Williams, the equivalent price of gasoline at the pump should range then between $4-5 per gallon.

Williams also told Alex that one of the execs had said him that the Euro is slated for collapse soon, although at an unspecified time.  Once this happens, the dollar will collapse within the next two to three weeks, wiping out tens of millions of Americans financially, presumably within a few days or a few weeks.
Lindsey emphasized once again, as he has done on all his interviews with Alex over the years, that he knows these executives very well and trusts their information because these predictions are always on target and on time.  For this reason he implored Alex’s listeners to get prepared now for collapse of dollar and do whatever will be necessary for to survive and then live through this debacle.

Williams became a friend and trusted confidant of these executives while he served as chaplain for them and their construction crews building the Alaska pipeline during the 1970s.  During that stay he learned that both of these executives were privy to the plans of the globalist elite to bring down nations of the world and create a new world order economy.  Because they trusted him, they allowed him to sit in on their private meeting and listen to them discuss their often-secret plans and programs.

Both executives have maintained their friendship with Williams since their days on the pipeline project with him.  They have also been willing to reveal the future plans of the globalists every so often ever since.  Furthermore, they have even let him reveal much of this information to the public during his radio interviews, through the videos he produces and through the content of his book, The Energy Non-Crisis.

When Americans Lose Everything, They Start To Lose It

As Gerald Celente has often warned, when Americans lose everything, they will start to lose it, and nowhere was that more apparent than in the case of Clay Duke, the 56-year-old gunman who opened fire on school board members in protest against his wife being fired and his unemployment benefits running out.

Duke spray-painted a V for Vendetta sign on the wall before brandishing a gun and telling everyone apart from the school board members to leave the room. Watch what happened next in the video below.



The response to this tragic series of events from both the establishment left and the establishment right will undoubtedly be to try and portray Duke as a nutcase conspiracy theorist whose views are an example of why free speech on the Internet needs to be curtailed, despite the fact that both on his Facebook page and another website he recommended, Duke promoted websites from across the political spectrum, including Media Matters, who are usually the first to exploit tragic events like these to sling mud at their political adversaries.
The fact that no one was injured and that Duke ultimately claimed his own life has contributed to him becoming a martyr in the Michael Douglas Falling Down mould rather than being considered a deranged lunatic, and Facebook pages in his honor are already attracting members.

Duke was stopped when shots from a security guard wounded him, before he took his own life. Despite the fact that it was a gun that stopped the rampage, Time Magazine and others are already blaming the tragedy on the Second Amendment.

In a de-facto online suicide note posted on Facebook, Duke railed against the financial terrorists that prompted him to take such a drastic course of action

• 

“I was just born poor in a country where the Wealthy manipulate, use, abuse, and economically enslave 95% of the population. Rich Republicans, Rich Democrats… same-same… rich… they take turns fleecing us… our few dollars… pyramiding the wealth for themselves,” he wrote. “The 95%… the us, in US of A, are the neo slaves of the Global South. Our Masters, the Wealthy, do, as they like to us…”

This goes far deeper than someone violently acting upon political grievances. Duke’s actions were solely guided by his economic woes, the fact that his wife had lost her job, that the unemployment benefits had run out, and that the future offered no hope whatsoever.

This is a future that millions more Americans will have to face in the coming years as the unemployment rate, which is really at around the 20 per cent level, continues to accelerate.

As we warned back in June, we are in the early stages of a new “age of rage,” which will be characterized by riots, revolutions and a widespread backlash against the economic holocaust that has been unleashed by the global elite.

Unfortunately there will be many more Clay Dukes over the coming years, there will be more Americans who lose everything and decide that the best way out is simply to lose it altogether.

Silvergoldsilver.com Runs Out Of All Precious Metals In Hours

Since Zero Hedge posted (unsolicited and uncompensated) the "Crash The JP Morgue" now-viral video late last night , it appears that among the tens of thousands of viewers who have subsequently gone to the goldsilvergold.com website, there have been quite a few conversions. So much so that as of today, the company is not taking any orders and is sold out of all products. The company goes on to say that it will not be accepting any new orders until December 6. We can only hope that the profits JPM will make in its copper market manipulation will be sufficient to offset the ever increasing pain it will experience courtesy of what is gearing up to be a massive margin call.


 

Source: http://www.zerohedge.com/article/silvergoldsilvercom-runs-out-all-precious-metals-hours

Ford, BMW, Toyota Took Secret Government Money

n the depths of the financial collapse, the U.S. Federal Reserve pumped $3.3 trillion into keeping credit moving through the economy. It eventually lent $57.9 billion to the auto industry — including $26.8 billion to Ford, Toyota and BMW.


The Fed on Wednesday was forced to reveal the identity of the companies it aided during the crisis, after contending to Congress that keeping their identities and the details of such lending secret was essential. Much of Wall Street, and corporate giants such as General Electric, Harley Davidson and McDonald's, took advantage of the Fed's help. We've done the math on how the Fed propped up the auto industry.

While Chrysler and General Motors had to go to Congress to beg for cash in 2008, every other automaker's finance arm was having trouble as well. Typically, once they lend money to a buyer, they sell the loan, get the cash upfront, then pump the proceeds back into the business. They also take out short-term loans called commercial paper that keeps the day-to-day business afloat. The crash cut the circuit, raising the chances the automakers couldn't make loans to buyers and keep selling new vehicles.

That's where the Fed stepped in. In normal circumstances, the Fed only lends money to banks, leaving the decisions about who should get credit to them. But when the financial markets started to collapse in late 2008, the Fed set up several programs to lend money directly to corporations, a highly unusual step.

According to the data, from October 2008 through June 2009 the fed bought $45.1 billion in commercial paper from the credit arms of four automakers - Ford, BMW, Chrysler and Toyota - along with GMAC (the former General Motors credit arm). Of those, Ford sold the most, with $15.9 billion.

The Fed also lent $13 billion to investors who bought bonds backed by loans to new car buyers from automakers and banks. The Fed made clear that while investors got the loans, the move was meant to keep the lenders in business; the credit arms of Ford, Chrysler, Nissan, Volkswagen, Honda and Hyundai all benefited directly.

Ford spokeswoman Christin Baker said the two programs "addressed systemic failure in the credit markets, and that neither program was designed for a particular company, or even a particular industry." Ford Credit has disclosed through SEC filings and conference calls with media and investors that it was taking part in both programs.
BMW told Bloomberg that the Fed lending "supported our financial profile and offered us an additional funding source, especially at times when the money markets and capital markets did not function properly and efficiently."

According to the Fed, the commercial paper loans have been paid in full, while some $2 billion remains outstanding on loans for bond investors.

The secrecy surrounding the details of the loans only masked how much aid corporate America and Wall Street needed. While General Motors and Chrysler took the brunt of the blowback for relying on government handouts, the reveal of the Fed numbers show that a far bigger slice of the U.S. auto industry needed help.

Source: http://jalopnik.com/5704575/

12 Simple Things You Can Start Doing Right Now To Prepare For The Coming Financial Apocalypse

It is becoming increasingly apparent that the U.S. economy is heading for complete and total disaster.  State and local governments across the nation are uncontrollably bleeding red ink.  The federal government has accumulated the largest debt in world history.  Every year we buy hundreds of billions of dollars more from the rest of the world than they buy from us.  That means that we are getting hundreds of billions of dollars poorer as a nation every single year. 

Meanwhile, thousands of factories and millions of jobs continue to be sent overseas as American cities turn into post-industrial wastelands.  Incomes are down, unemployment remains at depressingly high levels and very few of our politicians seem to have any idea how to fix things.  Yes, things are really, really bad.  So what are some things that we can all be doing to prepare for the coming financial apocalypse?

Well, the truth is that we all need to start becoming less dependent on "the system".  If the economy does completely fall apart at some point, your employer is probably not going to take care of you.  Neither is the federal government - just look at what happened in New Orleans after Hurricane Katrina.  In the end, you are going to have to take care of yourself and your family.

So are you ready?

Now is the time to prepare.  If you wait until things totally fall apart it will be far too late.
The following are 12 simple things that you can start doing right now to prepare for the coming financial apocalypse....

#1 Become Less Dependent On Your Job
Many people define a job as the state of being "just over broke".  The truth is that it is incredibly difficult to become financially independent working for someone else.  Now, the truth is that most Americans would not be able to survive without a job, but what would you do if someday you suddenly lost your job during a financial apocalypse?  Now is the time to start investigating alternate sources of income and different ways to build wealth.  Today it takes the average unemployed American over 33 weeks to find a job.  You may not always be able to count on being able to get a good job, and the economy is only going to get worse over the long-term.  All of us should be operating under the assumption that any jobs we now have will someday be taken away.

#2 Get Out Of Debt
Some people disagree with this, but unless society degenerates into complete chaos or we experience Weimar Republic-type hyperinflation, the truth is that your debts are going to continue to hang over you wherever you go.  Getting out of debt can be completely and totally liberating.  It will give you much more freedom and will make you far less dependent on your job.  In fact, it looks like a lot of Americans are already moving in this direction.  It was recently announced that 8 million Americans have stopped using their credit cards over the past year.  Why not join them?  When things start really falling apart and it is incredibly difficult for anyone to get a job, the last thing you want is a huge amount of debt hanging over your head.

#3 Reduce Expenses
For decades, most Americans have been living far beyond their means.  In the future, times are going to be really tough and we are all going to have to learn to tighten our belts.  Do you and your family waste money right now?  If you can eliminate that, you can live on a smaller income and you will have more money to invest in the things that are really going to matter.

#4 Purchase Land
Real estate is still priced too high in most areas of the United States, but the truth is that you don't want to wait forever to get your hands on a piece of land.  If a "financial apocalypse" does happen, you don't want to be stuck in a big city with no place to go.  You always want to have somewhere that you can "bug out" to.  The U.S. real estate market is continuing to struggle right now, so hopefully prices will come down even more and there will be some really great deals available over the next couple of years.

#5 Learn To Grow Food
Another reason why you want to purchase some land is so that you will have somewhere to grow food if you need to.  100 years ago almost all Americans knew how to grow their own food, and most of them also knew how to raise farm animals.  Today, relatively few Americans have those skills.  A great way to begin is by starting your own "survival garden".  If you are not already doing this, then why not start this upcoming year?

#6 Find A Reliable Source Of Water
Water is going to become a very, very valuable resource in the years to come.  It will be absolutely key for you and your family to have a dependable source of clean drinking water.  If you do not have water you will not be able to survive for long.  In the event of an economic meltdown, basic services such as power and water may not be there.  So be certain that you and your family have an alternate source of water to depend upon.

#7 Explore Alternative Energy Sources
This point is similar to the one above.  Do you think that if a financial apocalypse happens that you will always be able to depend on the power company?  The truth is that there is a good reason why so many Americans have been trying to go "off the grid".  Without power, life gets really difficult very quickly.  But if you are generating your own power then you won't have to worry about that.

#8 Store Supplies
In the event of a major disaster or emergency, store shelves are going to empty really fast.  If supplies are disrupted on a permanent basis, you may have to get by on what you already have in your home.  So do you and your family have enough warm clothes, personal hygiene products and medical supplies to last for an extended period of time?  Hopefully your local stores will always be able to supply what you need, but we need to prepare as if that is not guaranteed.

#9 Protect Your Assets With Gold And Silver
The way that the Federal Reserve is abusing the U.S. dollar, it is only a matter of time before rampant inflation sets in.  Even now, the U.S. dollar has already been seriously declining and precious metals like gold and silver have been shooting into the stratosphere.  In the future, your paper money may not buy much for you at all, but if you have some gold or silver coins you can always exchange them for the things that you are going to need.

#10 Learn Self-Defense
Did you see what happened at stores from coast to coast this past Black Friday?  Americans were literally trampling one another just to get their hands on some cheap foreign-made plastic crap.  So what do you think is going to happen once these people have been without food for two or three days?  Now is the time to think about how you will defend your home and your family from crazed looters.  It is not a fun thing to think about, but unfortunately we are heading for times that will not always be pretty.

#11 Keep Yourself Fit
As Americans, we live such "cushy" lives.  But when times get hard things will not be so cushy.  In fact, the years ahead are likely to demand quite a bit of physical activity.  So keep yourself in good physical condition right now.  In the future you will be very glad that you did.

#12 Make Friends
It is really, really hard to "survive" by yourself.  Those who will thrive the most in the future are those who will have a community that they can depend on.  Americans are always at their best when they work together.  Don't be afraid to reach out to your family and friends.  In the times ahead the world will be a very cold place, and a little love and compassion will go a long way.

Source: http://endoftheamericandream.com/archives/12-simple-things-you-can-start-doing-right-now-to-prepare-for-the-coming-financial-apocalypse

“Like The Great Depression”: Hundreds Line Up In Freezing Cold For Federal Aid To Pay Heating Bills

Despite the freezing temperatures, hundreds fought for a place in line in Marietta to apply for federal aid to help pay their heat and power bills this winter.

Some needed even more help just to deal with the cold. Ambulances were cold in and took at least two people to the hospital because of the freezing temperatures .

“I never thought I would be in the line,” applicant Deandre Marshall said. “It’s almost like being in a soup line during the great depression.”

Fed Withholds Collateral Data for $885 Billion in Financial-Crisis Loans

The Federal Reserve withheld details on individual securities pledged as collateral by recipients of $885 billion in central bank loans, denying taxpayers a measure of the risks they faced from its emergency aid.
The central bank yesterday released data on 21,000 transactions from $3.3 trillion in emergency lending to stem the financial crisis. July’s Dodd-Frank law required the Fed to disclose the names of borrowers, the size and interest rates of loans, and “information identifying the types and amounts of collateral pledged or assets transferred.”

For three of the Fed’s six emergency facilities, the central bank released information on groups of collateral it accepted by asset type and rating, without specifying individual securities. Among them was the Primary Dealer Credit Facility, created in March 2008 to provide loans to brokers as Bear Stearns Cos. collapsed.
“This is a half-step,” said former Atlanta Fed research director Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. “If you were going to audit the facilities, then would this enable you to do an audit? The answer is ‘No,’ you would have to go in and look at the individual amounts of collateral and how it was broken down to do that. And that is the spirit of what the requirements were in Dodd-Frank.”

Fed spokeswoman Susan Stawick in Washington declined to comment.

Public Disclosure

The public disclosure of the lending data should have been prevented because it could spur runs on the banks listed, said Darrell Duffie, a finance professor at Stanford University.

“That’s a very destructive process,” he said. Still, with the data released, “if you’re justified in getting the information, then you’re justified to get enough information to judge the risk the Fed took,” he said.
Under its definition of the “ratings unavailable” category for collateral posted under the PDCF, the Fed said that “in some limited cases, ineligible collateral was pledged, but it was reviewed with the clearing banks for exclusion from future pledges.” The central bank didn’t elaborate.

The secrecy surrounding Fed bailouts led lawmakers to demand disclosure after the central bank approved aid dwarfing the federal government’s $700 billion Troubled Asset Relief Program.

Collateral Pledged

The loans extended to primary dealers under the PDCF by the New York Fed were recourse loans, meaning the potential liability of borrowers who defaulted was greater than the value of the collateral pledged, according to the Fed. Primary dealers are the firms authorized to deal in government securities directly with the Fed. At its peak, borrowing under the facility came to about $156 billion.

It is “specifically impossible” to know how much risk taxpayers were taking by looking at pools of collateral grouped by asset class and rating, said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of “Elements of Structured Finance,” published in May by Oxford University Press.

“I need to know the individual composition because a $2 billion pool can be one asset of $2 billion, which would be very risky, or 2,000 assets of $1 million each, and that’s not risky at all,” Raynes said. “The spirit of Dodd-Frank was not respected, and they used the vagueness in the wording of the law to weasel out of fulfilling their duty to the American people.”

Corporate Debt

Over the life of the PDCF, $1.5 trillion of collateral with “ratings unavailable” was pledged, according to the Fed data. That’s larger than the $1.39 trillion of municipal debt pledged. Corporate debt posted totaled $2.35 trillion.

A total of $8.95 trillion was lent over the life of the PDCF, backed by $9.67 trillion in collateral.
The Fed released details identifying thousands of transactions including bonds bought under its mortgage purchase program and asset-backed commercial paper pledged under its Asset-Backed Commercial Paper Money-Market Mutual Fund Liquidity Facility.

The central bank also omitted details on individual securities pledged as collateral under its Term Auction Facility and its Term Securities Lending Facility, which was announced on March 11, 2008, as the first program under which the Fed planned to lend to non-bank dealers.

The Fed authorized its New York branch to establish the PDCF on March 16, 2008, the same day it made commitments to convince JPMorgan Chase & Co. to buy troubled dealer Bear Stearns. A run on New York-based Bear Stearns was seen as threatening the stability of global markets, and the PDCF for the first time allowed dealers to borrow on a collateralized basis from the New York Fed.

Lehman Collapse

In September that year, as Lehman Brothers Holdings Inc. was on the brink of filing for bankruptcy, the PDCF was expanded to accept all types of collateral pledged in tri-party repo deals, including high-yield, high-risk securities and equities. The previous program only accepted investment-grade debt securities.
The first peak of PDCF lending occurred in April 2008 at nearly $40 billion, according to the New York Fed. As financial markets improved, banks reduced their balance-sheet risk and the PDCF pricing became less attractive, usage of the facility fell off and stopped in mid-July that year.

Borrowing then leapt to over $140 billion in mid-September 2008 from no activity the previous week, according to the New York Fed. The program ended Feb. 1 this year.

Under the TSLF, dealers could swap investment-grade securities, including mortgage bonds, for U.S. Treasuries for 28 days. Usage peaked at $235.5 billion in October 2008, and the program was also closed in February.

Source: http://www.bloomberg.com/news/2010-12-01/taxpayer-risk-impossible-to-know-for-some-fed-financial-crisis-programs.html

Fed Wealth Grows While Others Drown In Debt

The Fed grows richer at our expense, Wikileaks news links, desperate things for desperate people, the clarion call of gold, black friday unremarkable, countries drown in the debt of other countries.

The Federal Reserve’s balance sheet grew a 4th straight week to $2,328 trillion, up $31 billion in a week. In May the balance sheet was $2,333 trillion.

Holdings of government securities totaled $901.24 billion, and rose $27.62 billion. Mortgage holdings were unchanged and Agency holdings fell slightly.

It might interest you to know that over the past seven years federal debt has doubled to almost $14 trillion. That is more than $100,000 for every American household.

It should be noted that combined expenditures on Social Security, Medicare and Medicaid are projected to account for 45% of primary federal spending. That is a rise equal to 62% of GDP to 185% in 2035. 70% of US Treasuries are held by private investors and once they start to realize the US is really broke the game is over.

On a European note, Germany cannot keep paying for bailouts without going bankrupt itself. Germany is drowning in the debt of other countries.

Assets under management in commodities hit a record high of $340 billion in October.

A very important event is that China and Russia are going to quit using the US dollar. This is big news. In spite of the current USDX dollar rally it will reduce demand for dollars and expedite the dollar’s demise. Once the dollar rally, induced by European problems is over, the dollar should take out 74 on the USDX. Current US insolvency is being ignored as the five-euro zone PIGGS get gored.

In addition, we wonder whether even the strongest country, Germany, can survive the onslaught of the 5 PIGGS and their financial problems. The Germany people are very upset that they have to bail out these Club Med countries. The US has the same problem with large liberal states with vast amounts of illegal aliens that are broke and will have to depend on the federal government for perpetual funding. Accompanying that funding will come further Federal control.

This presents two similar sets of circumstances. A breakup of the euro zone, which we have felt was inevitable since 1997, and a breakup of the unnatural alliance known as the European Union. In the US a similar set of circumstances could bring to the forefront the state sovereign movement. It will be interesting to see how both develop. It could well end up as everyman for themselves. Worldwide banks, individuals and corporations are insolvent in very large numbers. The banks, Wall Street and the City of London have been the root cause of these problems and by the countries bailing them out and transferring the debt to the taxpayer; they have in turn destroyed the value of their currencies versus gold. 

The problem is not currency versus fiat currency, but all currencies versus gold. The real exodus from currencies hasn’t even as yet begun because 95% of the world hasn’t discovered the problem as yet. Once the debt markets discover this the stampede will begin and not everyone will be able to get out the door at the same time – virtual chaos will ensue. The gold and silver markets are already telling you that. Those who act now can save their wealth, the rest, as we have seen in the past, will loose most everything. Next year worldwide more and more will join the flight to quality as prices soar. Confidence in all currencies will lessen as currencies head for a massive crackup. A compounding factor is that exchanges such as the LBMA in London and the Comex in NYC have sold scores more contracts in gold and silver than they can deliver. That will create a delivery crisis, not only for them, but also in the derivatives market as well. That could well destroy the Exchange Traded Funds GLD and SLV in a scenario when everyone loses their investments. The manipulation that has gone on in the gold and silver pits has been ongoing since August 1988, but now they make no effort to cover up what they are doing. It’s in your face and arrogant. 

There have not been free markets for many years, thanks to our government, the CFTC and the SEC as regulators for government and in behalf of government and those who control government. This is an absolute disgrace in a democracy. Obviously we no longer have a democracy or a republic, but in its place corporatist fascism.

Desperate people do desperate things and that goes for governments as well. Many governments are broke. We know about governments in Europe, known as the 5 PIGGS, then there are many in Eastern Europe, England and the US. They all are in desperate shape and that is why the US and the UK in particular are suppressing gold and silver. If they go up in value more and more people will realize something is terribly wrong. The lynchpin of the entire world financial system, the US, is broke and the US dollar is not worth the paper it is written on. The last time we looked at the forex holdings of all nations 59-1/2% was held in US dollars, which means when the dollar falls lower all nations are going to suffer. Those nations, individuals and corporations that figure out the truth through the smoke and mirrors can save what they have by dumping dollar for gold and silver. Once the panic begins it will be too late.

There have been statements as of late in reference to a gold standard from what we consider official sources. We believe the elitists realize that they cannot begin to consider a worldwide trading unit no matter what its form without gold backing. Countries are not going to allow themselves to get hung out to dry again, as they have been with a fiat dollar. We know most economists want the present system to continue, so they do not have to learn real economics. Even so-called conservative economists and analysts believe in the current system, which has been an abysmal failure. That has been borne out by two depressions and a population growth is no excuse for not using gold backing for currencies. It has little to do with central banks and governments creating money and credit. Gold production is falling not rising and adds only 1.5% to existing supply, making it rare and to be valued. The presence of gold backing helps demand for expansion. Keynesians always like to forget wars and the distortations they create, such as fiscal debt and expansion of the fractional banking system. Today we still have wars amidst a new declining world population; a sort of double whammy restricting the excuse for more money and credit.

The real problem is gold caps what central banks and banks can do. That limits leverage that is why the wealth accumulating elitists hate gold and besides gold’s upward movement tells us something is wrong within the system. Over and over again every time the system gets in trouble more money and credit is issued. That might for a time keep the system afloat but it also is debt creation, which in turn depreciates the dollar. It is impossible to separate debt and the affect it has on currency, as German Chancellor Ms. Merkel tried to do this past week. All she did was make a fool out of herself. One has to follow another. Each day credibility is strained and each day gold has another reason to rise. This is why gold-based accounts are starting to appear in Europe, mainly Austria, and under the circumstances that trend will grow as the flight to quality rises. Such responses are understandable as governments compete at destroying their currencies. Every time they want to depreciate the value of their currency, to create more of it, buy dollars thereby cheapening their currency, and use the result to purchase US dollar bonds in a US dollar that is also depreciating versus other currencies and in particular gold. Remember, all currencies have fallen versus gold for the past ten years. Thus, the rat race continues in the currency road to oblivion.

In the final analysis in a form of natural progression exporters may demand to be paid in gold, or a gold backed currency, or simply dump other currencies for their own currency, gold, commodities or something else physical. This is where all this is headed. We could also see, gold, silver and commodity bonds backed by physicals or the shares of producing companies. There will be gold and silver backed accounts, which have begun being offered in Austria. As long as fiat currencies continue to depreciate there will be a growing demand for such accounts, which at worst will maintain gold at some permanent level. The value of gold and silver will remain strong. Even gold backed debit cards could come into everyday use. It is absolutely essential that monetary policy include gold if confidence is to ever be restored in the minds of people worldwide. What one has to consider is that gold suppression doesn’t work and can’t work over long periods of time. There are those who believe that the re-adoption of gold will be a major addition. We believe it means major change. What economists and analysts fail to really understand is the history of money. It is not only gold backing for confidence, but the time, places and social and political implications. Keynesianism will soon be dead and with it a fiat world. Gold and its place in monetary and fiscal policy will reassert itself as it is again recognized as a reliable storage for value. Ascending gold will bring about problems for governments because for a world reserve currency like the dollar it would restrict seigniorage profits and the proliferation of money and credit. We have seen the re-ascendancy of gold over the past two years, and that is only the beginning for gold or gold backing to become universal.

What is worse for nations is to ignore gold’s clarion call. If they do not readopt gold into their currency reserves private systems will develop whether they like it or not. Deleveraging has begun and there will be no turning it back for banks. Banks and governments will be in serious trouble and many will go bankrupt. Beware, major changes and dislocations are on the way. If you don’t own gold and silver you are going to be in lots of trouble.

It seems that a number of prominent nations are having second thoughts about implementing a world government at this juncture. That distaste is reflected in their seeming opposition to the implementation of “quantitative easing two,” another injection of money and credit into the world financial system. They are calling for austerity and they know this will bring about deflationary depression.

The relative weakness of the US dollar, the euro and other currencies as well, has brought about great consternation and in the search for solutions gold is again being considered as a reserve for the dollar again, or for backing for a new international trading unit. We saw the trial balloon by World Bank President, Robert Zoellick, who told us in the pages of the Financial Times that, a new unit should be considered consisting of six major currencies backed by gold. Mr. Zoellick, is an ultimate insider, so what he has to say should be listened to very carefully. This is well put, a crimp in their control of the world financial system, but they can still control the system albeit in a more conservative way. Other commentators believe this sort of monetary arrangement is many years away; we believe it is closer than that. The US dollar has serious problems, as do most other currencies. In this regard the euro is a good example, as currency that could be on the verge of a breakup due to the financial state of 5 of its 16 members, which is front-page news around the clock. The present situation vis-à-vis the dollar and the euro was probably the last thing the insiders ever expected. 

It has pointed up the fact that a group of nations using one currency doesn’t work any better than one fiat currency. The gold backing on the euro was 15%, but over the past 10 years gold reserves have fallen precipitously as the ECB, the European Central Bank, joined the US Treasury and the Federal Reserve in their transparent attempt to suppress gold prices. That has left the ECB perhaps with a paltry 5% gold backing reflecting a stewardship of political and internationalist necessity. Like it or not the battle between the dollar and gold has been won by gold over the past two years, and at the highest elitist circles this is self-evident. The point is there are several major nations accumulating gold, which we pointed out in a previous issue, not only to dump depreciating dollars but also to put the only real money behind their currencies.

John Maynard Keynes, in order to justify his version of corporatist socialism, called gold a barbarous relic, which has led to the problems that we have today. In spite of the Keynesian economic approach we have had a second major depression in 80 years, not to mention the score of recessions in the interim.

A full body scanner operator was caught masturbating during a scanning session by airport staff late Tuesday.

Airport officials at Denver International airport were on high alert yesterday when a full body scanner operator was caught masturbating in his booth as a team of High School netball players went through the scanner.

"The young ladies were going through the scanner one by one, and every time one went through, this guys face was getting redder and redder. His hand was moving and then he started sweating. He was then seen doing his 'O' face. That's when the security dragged him out of his booth and cuffed him. He had his pants round his ankles and everybody was really disgusted," Jeb Rather, a passenger on a flight to New York told CBS news.

The controversial scanners display every minute detail of a person's body and have been called intrusive by privacy campaigners. Body scanners penetrate clothing to provide a highly detailed image so accurate that critics have likened it to a virtual porn shoot. Technologies vary, with millimeter wave systems capturing highly detailed pictures of genitals, and backscatter X-ray machines able to show precise anatomical detail. The U.S. government likes the idea because body scanners can detect concealed weapons better than traditional magnetometers.

"What do you want to do, get blown up by a goddamn Arab at 30,000 feet or we get to see your private parts? It's up to you, the ball's in your park," head of the TSA's scanning department, Rodney Schroeder, told CNN.

492: The number of days since the average borrower in foreclosure last made a mortgage payment.

Banks can’t foreclose fast enough to keep up with all the people defaulting on their mortgage loans. That’s a problem, because it could make stiffing the bank even more attractive to struggling borrowers.

In recent months, the number of borrowers entering severe delinquency meaning they missed their third monthly mortgage payment has been on the decline, falling to about 700,000 in October, according to mortgage-data provider LPS Applied Analytics. But it’s still more than double the number of foreclosure processes started.

As a result, banks are taking progressively longer to foreclose. The average borrower in the foreclosure process hadn’t made a payment in 492 days as of the end of October, according to LPS. That compares to 382 days a year ago and a low of 244 days in August 2007.

In other words, people who default on their mortgages can reasonably expect, on average, to stay in their homes rent-free more than 16 months. In some states such as New York and Florida, the number is closer to 20 months.

That’s a meaningful incentive, and it’s likely to grow unless banks manage to boost their throughput. Speeding up the process won’t be easy, as demonstrated by the banks’ continuing legal troubles related to robo-signers, bank employees who signed foreclosure affidavits without properly checking the required loan documentation.

Millions of Americans still are paying their mortgages even though they owe more than their homes are worth. The more banks’ backlog grows, the more likely they are to join it, adding to the already giant pile of foreclosures weighing on the housing market.

Barb Capa was at Saks Inc.’s flagship store in New York feeling flush and ready to buy.

“I just feel like spending more because of an increase in my salary,” the 22-year-old nurse from New York said yesterday. In 2009 Capa spent $1,000 during the holiday season. This year she is ready to “splurge” and drop five times as much on designer bags, clothes and shoes.

She’s not the only one. The average shopper spent 6.4 percent more than last year over the holiday weekend, the National Retail Federation said yesterday. Customers bought more non-essentials like jewelry and toys, signaling that the U.S. economy, propelled by consumer spending, is regaining strength.

“Consumers are more comfortable spending again, and that trend has held up,” Maggie Taylor, a vice president at Moody’s Investors Service in New York, said yesterday. “I don’t think people are as worried about losing their jobs anymore.”

U.S. retail sales during Thanksgiving weekend totaled $45 billion, the Washington-based NRF said in a statement, citing a survey conducted by BIGresearch. More people are scouring for deals earlier, with the number of customers shopping on Thanksgiving Day more than doubling over the past five years, the group said.

On Black Friday itself, so named because that’s when many retailers become profitable, traffic rose 2.2 percent, ShopperTrak said on Nov. 27. Retailers lured people into stores with promotions like Wal-Mart Stores Inc.’s $5 Barbie and J.C. Penney Co.’s $10 diamond-accented earrings. The Chicago-based consulting firm said sales rose 0.3 percent to $10.7 billion.

Mutual funds’ ties to so-called expert networks that have been probed as part of an insider trading investigation may undermine efforts by the industry to stem three years of client withdrawals from stock funds.

Janus Capital Group Inc. and Wellington Management Co. were among firms that received requests for information last week as part of an insider trading investigation involving hedge funds as well as mutual funds. None of the companies have been accused of wrongdoing.

The probe hits firms as they try to reverse $90 billion in withdrawals from U.S. stock funds since the beginning of 2009. Damage from the industry’s last run-in with regulators, a series of trading scandals in 2003 and 2004, took years to repair and led to more than $3 billion in fines against more than two dozen firms, including Bank of America Corp., Putnam Investments, Janus and MFS.

“There was reputational damage from that scandal that took a long time to heal,” said Burton Greenwald, a fund-company consultant based in Philadelphia. “In an industry that handles people’s money and savings, reputation is enormously important.”

Both MFS and Wellington were clients of Broadband Research LLC, a Portland, Oregon-based company that provides research to money managers and whose founder, John Kinnucan, was visited by federal officials as part of the probe. Affiliated Managers Group Inc.’s Friess Associates, and the Columbia Management unit now owned by Ameriprise Inc., have also been clients of the researcher, Kinnucan said in an interview. None of them have been accused of wrongdoing.

Shoppers crowded stores on Black Friday but spent just a little more than last year on the traditional start of the holiday shopping season, according to data released Saturday by a research firm.

Retail spending rose a slight 0.3 percent, to $10.69 billion, compared with $10.66 billion on the day after Thanksgiving last year, according to ShopperTrak.

Two factors behind the slim increase, a disappointment following bullish reports from stores Friday, were heavy discounts earlier in November and online shopping, which saw a big increase.

Chicago research firm Shoppertrak, which tallies sales in more than 70,000 retail outlets across the country, said the total was still a record for the day. It stood behind its prediction for spending to rise 3.2 percent for the season.

"It's hard to say Black Friday wasn't a success, it's just not the success we saw in the mid-2000s, when the day really became a phenomenon," ShopperTrak founder Bill Martin said. he slim sales increase came despite a 2.2 percent boost in store traffic, which Martin said suggests that consumers were in the stores searching for deals. "This means the American shopper has adapted to the economic climate over the last couple of years and is possibly spending more wisely as the holiday season begins," Martin said. ShopperTrak said spending for first two weeks of the month rose 6.1 percent over last year, as retailers promoted the sort of doorbuster deals that normally didn't appear until after the turkey dinner was finished. Traffic in stores the two weeks ended Nov. 13 jumped 6.2 percent. "Retailers were very conscious of driving traffic early in November and in doing so, some might have thinned Black Friday spending a bit," Martin said. "The reality is we have a deal-driven consumer in 2010 and that consumer responded to some of the earliest deep discounts we've even seen for the holidays."

Many retailers also offered those discounts and promotions on their websites. Online merchants saw a 16 percent revenue spike, according to research company Coremetrics. That increase came partly from shoppers who spent more per online purchase, the Web research company said. The average order rose to $190.80. That's a 12 percent increase over $170.19 on the same day last year.

The solid increase followed a 33 percent online spending spike on Thanksgiving Day.

"The season's off to a great start," said John Squire, Coremetrics vice president of strategy. "It really shows really strong consumer sentiment for buying and for going online." Meanwhile, PayPal reported an increase of about 27 percent in payment volume on Black Friday compared with last year. The eBay Inc. unit did not release a dollar amount for the sales it processed.

Lots of shoppers made it an all-nighter online. "Even at 1 a.m. Pacific, there was still very strong buying across the U.S.," Squire said.

Shopping on smart phones remained a small, though growing, piece of the pie. Coremetrics said about 5.6 percent of people logged onto a retailer's website using a mobile device. That compares with less than 1 percent on last year's Black Friday, Squire said. More dollars have shifted to online shopping over the years, but it's still a relatively small share of holiday spending, between 8 and 10 percent.

But many shoppers have become converted to the comfort and convenience of browsing the Web for gifts. Kelly Hager, 30, of Baltimore, Md., is shopping exclusively online for the fourth year in a row.

"It's nice to not have to fight for a parking spot and deal with 3 billion people who are all trying to get the same thing I'm trying to get," she said. Hager used to work at a mall, so she's seen Black Friday from both sides.

Retailers and analysts also were encouraged that people seemed to be buying more items for themselves, a sign they're feeling confident enough to spend more money overall. Thanksgiving weekend is prime time for retailers. In recent years, Black Friday called that because the surge of shoppers could take retailers into profitability, or "the black," for the year has been the busiest shopping day of the year, according to data from ShopperTrak.

Black Friday is generally not as big for online retailers as Monday after Thanksgiving, known as "Cyber Monday," which Coremetrics predicts will be the busiest online shopping day of the year, driven by heavy online promotions.

The Black Friday blitz doesn't make or break the holiday season. In fact, shoppers seem to be procrastinating more every year, giving retailers some tense moments the last few days before Christmas.

"I wait for the last minute," said Linda Majkowski of Queens, N.Y., who visited a Costco in Melville, N.Y. on Saturday, but said she hadn't started her holiday shopping yet. "I just found out what everybody wants on Thanksgiving."

AP Business Writers Mae Anderson and Michael Lee in New York and Jessica Mintz in Bellevue, Wash., contributed to this report.

Investors took almost $2.27 billion out of municipal-bond mutual funds in the week ended Nov. 24, according to Lipper FMI, a research company. 

It was the second-straight outflow and followed a week in which investors withdrew more than $3.1 billion, the most since January 1992, according to Tom Roseen, senior analyst at Lipper in Denver. The most-recent data covers Nov. 18 through Nov. 24. 

The latest withdrawals occurred as yields on longer- maturity tax-exempt securities headed for the biggest weekly drop since August, according to Bloomberg Valuation indexes. Yields on tax-exempt 30-year bonds fell almost 22 basis points to 4.32 percent on Nov. 24 from Nov. 18, the index shows. A basis point is 0.01 percentage point. Issuers who were rushing to sell taxable Build America Bonds, known as BABs, before the program is set to end next month spurred municipal supply to a record this month. Thirty- year tax-exempts sold off from Oct. 25 through Nov. 18, gaining about 77 basis points in yield, according to the Bloomberg Valuation index. Bond yields rise as prices fall. 

A sweeping insider-trading investigation is raising questions about how hedge funds and other big investors dole out a common, and controversial, currency that flows freely across Wall Street. The currency is known as soft dollars.

Stock brokerages award soft dollars to investors much like an airline doles out frequent-flier miles, giving the most clout to the biggest traders. The clients then use the soft dollars in a variety of ways, but largely spend them on investment research.

Investigators now want to know whether brokerages and their clients may be abusing those otherwise legitimate soft-dollar funds, directing payments to so-called expert networks and other middlemen in search of inside information.

SAC Capital Advisors, a $12 billion hedge-fund firm run by Steven Cohen, told clients this past week that federal authorities appear focused on soft-dollar payments. SAC said it was basing that impression on a subpoena the firm received Monday afternoon, which it called "extraordinarily broad."

Federal criminal charges filed Wednesday against Don Ching Trang Chu, who worked for a California expert-network firm called Primary Global Research LLC, highlighted soft-dollar payments his firm earned for hooking up alleged tipsters with hedge-fund clients. On Wall Street, "soft dollar" can often be used as a verb. In one instance cited in the complaint, a hedge-fund manager who was cooperating with prosecutors said he wasn't able to "soft-dollar" a consultation session by sending trades to the firm's broker. When he offered to pay out of his pocket, the company told him not to worry about it.

A criminal complaint against Mr. Chu alleges that Primary Global clients paid for the firm's research in part by sending trading and the soft dollars that came along with it to Primary Global's broker-dealer arm.

To prove insider trading when information was passed from one person to another, prosecutors must show the tipper received a direct benefit, such as payment, or an intangible benefit for the nonpublic material. Tracking how those soft dollars were used would thus be an important element to a case, said Steve D. Feldman of law firm Herrick Feinstein LLP.

Mr. Feldman said that in certain cases, the use of soft dollars could show criminal intent if investment firms purposely obscured payments by routing them through their brokers rather than paying directly.

"It would be the kind of thing that's indicative of trying to hide the ball," Mr. Feldman said.

In 1998, the SEC estimated that more than $1 billion worth of third-party research was paid for each year by soft dollars. The boom in hedge funds and proprietary-trading operations since then fueled greater demand for research as more investors surfaced who were willing to pay big money for an information edge. Total soft-dollar funds are now estimated in the billions.

Gaining such an "edge" is the very basis of centuries of Wall Street behavior. This past week, as news of the insider-trading investigation intensified, many were left grappling with which of those practices might be attacked by prosecutors.

By focusing on insiders at big financial firms and corporations, and also little-known consultants who link them together, investigators are piecing together a web of relationships in an attempt to expose how suspicious trading frequently has gone undetected, the people say.

The probe has set off a wide-ranging debate about just what type of stock research might cross a line. For instance, one question is whether assembling disparate pieces of information in themselves not material gives some traders a potentially illegal advantage. The U.S. crackdown gathered steam quickly during the past week, as the Federal Bureau of Investigation raided offices of hedge funds controlling billions of dollars, and demanded trading records and other information from some of the biggest investment firms in the country.

The Manhattan U.S. Attorney's office has sent subpoenas to big hedge funds SAC Capital Advisors and Citadel LLC as well as mutual-fund firm Janus Capital Group Inc. and Wellington Management Co., one of the biggest U.S. institutional-investment companies. Investigators are seeking communications, trading records and other data as the probe widens, say people familiar with the matter. The firms either said they were cooperating or declined to comment. None of the companies is accused of wrongdoing.

Prosecutors also won a legal victory on Wednesday against a founder of the Galleon Group hedge fund, Raj Rajaratnam, gaining permission to use wiretaps against Wall Street investors in attempts to prosecute insider-trading.

In the month ahead, the government is expected to make new arrests, said people close to the case. While Mr. Chu is the only person who has been publicly charged, these people say, in recent weeks several hedge-fund traders and expert-network firm employees have been contacted by investigators and begun hiring criminal defense lawyers. 

The investigation is building a picture of a vast "closed market in insider information," said Tamar Frankel, a Boston University law professor and expert in financial regulation. "It's a market of give-and-take: Today you gave, and tomorrow I give back.

Wikileaks, the most important thing to happen this year. 

 Webster Tarpley: Media's Wikileaks"CIA Style Spin"Gives Obama Excuse to Invade Iran & Pakistan! 1/5

http://www.youtube.com/watch?v=P0sK4TjcUd4&playnext=1&videos=ITfdKQfPgqw

 WikiLeaks Documents Show Hillary Clinton Authorized US to Spy on Foreign Diplomats

http://www.truth-out.org/wikileaks-documents-show-hillary-clinton-authorized-us-spy-foreign-diplomats65506

Debt = Money, Money = Debt

Where does money come from?  You would think that question should be so simple that any 10-year-old child could answer it, but that is not the case.  You see, the truth is that the vast majority of American adults cannot even answer that question.  Yet we all use money every day.  Without money our lives would fall apart fairly quickly.  But most of us never stop to think about how it comes into existence.  The truth is that bankers are the source of all money in the United States.  Either the Federal Reserve bankers create it, or individual bankers create it through the mechanism of fractional reserve banking.  In both cases, it is bankers that are creating the money.  In our financial system, the U.S. government cannot print money and no individual citizens are allowed to create money.  Rather, it is the bankers who have a complete and total monopoly on the creation of money in the United States.

Most of the time, any money that is created comes into existence as debt.  Either the U.S. government goes into more debt when it gets more dollars from the Federal Reserve or individual Americans go into more debt when they take out loans from individual banks.

First, let's examine what happens when the U.S. government gets more money from the Federal Reserve.
Under our current system (which is fundamentally flawed), the U.S. government cannot just fire up the printing presses and print a bunch of dollars if it decides that more money needs to be produced.

Rather, if the U.S. government needs more money it asks the Federal Reserve for it.

So who is the Federal Reserve?  Well, they are actually not part of the U.S. government.  In fact, the Federal Reserve is about as "federal" as Federal Express is.

The Federal Reserve is actually a privately-owned central bank that has been given authority by the U.S. Congress to issues our currency, set our interest rates and essentially run our economy.
All U.S. government debt is created through the Federal Reserve system.

When the government wants more money, the U.S. government swaps U.S. Treasury bonds for "Federal Reserve notes", thus creating more government debt.  Usually the money isn't even printed up - most of the time it is just electronically credited to the government.  The Federal Reserve creates these "Federal Reserve notes" out of thin air.  These Federal Reserve notes are backed by nothing and have no intrinsic value of their own.

The Federal Reserve then sells these U.S. Treasury bonds to investors, other nations (such as China) or sometimes they "sell" them back to themselves.  In fact, the Federal Reserve has been gobbling up a whole lot of U.S. Treasuries lately.  Some refer to this as "monetizing the debt", but that is not quite an accurate statement.

When the Federal Reserve creates money this way, it does not also create the money to pay the interest on the debt that has been created.  Eventually this puts pressure on the U.S. government to borrow even more money to keep the game going.  So what this creates is a spiral where the U.S. government must keep borrowing increasingly larger amounts of money, where the money supply is endlessly expanding and where the value of the U.S. dollar is destined to continue going down forever.

Do you think it is some big mystery why the value of the U.S. dollar has declined over 95 percent since the Federal Reserve was created in 1913?  Just look at what our national debt has been doing over the last 40 years.  It just continues to go up and up and up....

As long as the Federal Reserve system exists, the national debt will keep going up, the money supply will keep going up and the U.S. dollar will continue to decline in value.

This is not because of some big mistake.  This is what the Federal Reserve system was designed to do.  It was designed to trap the U.S. federal government (and by extension all of us) in perpetual debt.

If the U.S. government really wanted to get out of debt it would take back control of our currency from the bankers and would start issuing debt-free money.  But don't expect that to happen any time soon.

In fact, the Federal Reserve is just getting more powerful and becoming more out of control.  According to data released on Wednesday, over $9 trillion in overnight loans were made by the Federal Reserve to major banks and large financial institutions during the financial crisis in 2008 and 2009.

Now, the truth is that this number is inflated because each time one of these loans was "rolled over" it was counted as a new loan by the Fed.  So don't get too excited about the $9 trillion figure.  But still, the amount of money that the Federal Reserve just whipped up out of thin air and lent out to its friends at extremely low interest rates is absolutely mind blowing.

In 2010, the Federal Reserve has initiated a massive new round of "quantitative easing", and it is yet another example of how out of control the Federal Reserve is becoming.  So exactly what is quantitative easing?  Well, essentially what happens is the Federal Reserve conjures up gigantic amounts of money out of thin air and uses it to buy up things like U.S. Treasury bonds and mortgage-backed securities.  The Fed hopes that by injecting hundreds of billions into the system it will "stimulate" the economy.

Prior to 2008, the Federal Reserve had never been so bold as to print up hundreds of billions of dollars whenever it wants.  But now it seems as though the Federal Reserve is just going to zap hundreds of billions of dollars into existence whenever their friends are in trouble or whenever they feel the economy needs a little "stimulus".

So can you or I "zap" money into existence?  No, if we print money we go to jail.

Can the U.S. government "zap" money into existence?  No, only the Federal Reserve is allowed to do that.
But most Americans will never understand how this system works.

The second primary way that our money comes into existence is through fractional reserve banking.
According to the New York Federal Reserve Bank, fractional reserve banking can be explained this way....
"If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000)."
This is actually an oversimplification, but let's roll with it.  Many Americans would be shocked to learn that if we all went down to the bank today and wanted to take our money out, the bank would only be able to satisfy a small fraction of our requests.

The bank does not keep all of your money in the bank.  It lends most of it out.

In fact, any bank can loan out as much money as it wants as long as it keeps enough in reserve to satisfy legal requirements.

Each time a loan is made by a bank, more money is created and more debt is created.
Isn't this kind of insane?

Well, yes, but at least banks have to maintain a certain amount of discipline by keeping some money in reserve.

Unfortunately, Federal Reserve Chairman Ben Bernanke is on the record as saying that he wants to completely remove all reserve requirements for banks.

Keep in mind that Bernanke is in charge of "running" our economy.
There are a few members of Congress such as Rep. Ron Paul that have tried to hold the Federal Reserve accountable.  The following is an excerpt from remarks that Ron Paul made to Bernanke during a congressional hearing a while back....

"The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen. The foolish notion that unlimited amounts of money and credit created out of thin air can provide sustainable economic growth has delivered this crisis to us. Instead of economic growth and stable prices, (The Fed) has given us a system of government and finance that now threatens the world financial and political institutions. Pursuing the same policy of excessive spending, debt expansion and monetary inflation can only compound the problems that prevent the required corrections. Doubling the money supply didn’t work, quadrupling it won’t work either."

Unfortunately, Ron Paul is vastly outnumbered by members of Congress who seem to believe that the Federal Reserve is doing a great job.  In fact, a bill that would have provided for a one-time audit of the Federal Reserve got shot down.  Apparently members of Congress did not think it was a good idea for the American people to be able to get a peek inside the institution that issues our money and runs our economy.
It is time for the American people to wake up. 

The borrower always ends up the servant of the lender.  In America today, virtually all of our money comes into existence as debt, nearly all of our major purchases are made with debt, the popping of debt bubbles has caused almost every major financial crisis we have had, our state and local governments are drowning in a sea of debt, and our federal government has piled up the biggest mountain of debt in the history of the world.

Any economic system that is based on debt is destined to fail - including ours.  Isn't it about time to start asking ourselves how we got into this gigantic mess in the first place?

Unfortunately, Americans have been so dumbed-down by our pathetic education system and are so busy gorging themselves on endless amounts of entertainment that they literally have no idea how our system works.

Most people will never wake up until a complete and total economic collapse happens.  By then, it will be far too late.

http://theeconomiccollapseblog.com/archives/debt-money-money-debt